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FIN-2.08 - Cost Allocation

COST ALLOCATION

Binding City Policy

BCP-FIN-2.08

Policy

The City shall establish and maintain a consistent methodology for allocating the costs of the City’s central service functions and activities that benefit or are used by several City bureaus. The goal is to provide stable, predictable, and equitable costs and rates to organizations that pay for these services.

The two primary methods used to allocate central services costs to City organizations are the General Fund Overhead (GFOH) model and interagency agreements.

General Fund Overhead (GFOH)

Costs shall be allocated for general central support services or activities budgeted in the General Fund. See FIN 2.08.01 General Fund Overhead Model list of services and activities.

The amount to be recovered through the GFOH model shall include all costs of the bureau or activity less all internal and external revenue. See FIN 2.08.02 cost allocation criteria and metrics.

The City Budget Office shall provide each paying agency with its projected GFOH costs in a timely manner so the costs can be included in each agency’s budget request.

The City Budget Office shall establish and staff a General Fund Overhead Advisory Committee to assist the CBO in the management of the GFOH system. See FIN 2.08.03 General Fund Overhead Advisory Committee list of bureau committee members. The CBO shall review any updates to the GFOH model with the Committee to ensure that it meets the goal of providing a stable, predictable, and equitable allocation of GFOH costs.

Every five years, the CBO shall conduct a comprehensive review of the GFOH model to identify any needed changes. The results of this review and any recommendations shall be provided to the Council.

The CBO shall publish a table showing the City’s GFOH metrics and the share each fund is paying.

Interagency Agreements (IAs)

Interagency service agreements are agreements between bureaus for the exchange of goods or services for payment. Designated business service activities shall recover their costs by charging rates. The system of interagency agreements involves budgeting, billing, and service description components.

Those bureaus recovering such costs through the use of rates shall do so through the use of interagency agreements between the providing bureau and the receiving bureau. The amount to be recovered by those bureaus through rates shall include all direct and indirect costs of providing the service. IAs are considered as part of the budget process and may only be adjusted by ordinance. See FIN 2.08.04 Interagency Agreements.

Responsibility

The City Budget Director is authorized to develop and issue procedures with input from Council, bureaus, and other appropriate stakeholders in order to implement the General Fund Overhead Model.

The City Budget Director, in consultation with the Chief Administrative Officer, is authorized to develop and issue procedures with input from Council, bureaus, and other appropriate stakeholders in order to implement the cost allocation policies related to interagency agreements.

HISTORY

Resolution No. 35089, adopted by City Council December 16, 1992.

Replaced by Ordinance No. 181829, passed by City Council May 14, 2008 and effective July 1, 2008.

Amended by Resolution No. 37086, adopted by City Council August 6, 2014.